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Prices remain reasonable at MISO 2024 capacity auction- except in one zone

Prices remain reasonable at MISO 2024 capacity auction- except in one zone
(Image by Markus Spiske from Pixabay.)

MISO’s April 2024 capacity auction results show all zones cleared at $30 except for Missouri, which cleared at $720 in the fall and spring seasons. The high price was attributed to an 872 MW capacity deficit in the Missouri zone, primarily due to coal retirements and maintenance. 

MISO’s 2024 auction contains some positive news for renewables because solar (increasing by 61%) and wind (up by 4%) continued to grow. Combined, wind and solar cleared nearly 10,000 MW, with solar representing half of this capacity. Demand response was only 8,000 MW, with natural gas as the clear winner at nearly 60,000 MW. 

Proposals are underway for Load Modifying Resources (LMRs) with an ability to be called upon with less than a half-hour notice, receiving 100% credit starting in the 2028/29 planning year. Likely, Missouri’s decision to lift the ban on third-party aggregators for C&I customers resulted in lower capacity prices in the summer. That implies Minnesota and other states aiming to lift the ARC ban must speed up.

Key takeaways from the auction in 2024 – Missouri Zone is in the spotlight

In PJM’s capacity auction last year, PJM stopped the auction before declaring the results- in Delmarva Dayton Power Light South Zone, the prices were higher than normal because planned generation with signed interconnection agreements didn’t make an offer. MISO’s second seasonal auction did not have such drama. But the spotlight is on the Missouri zone because of the $720 per MW-day prices in the fall and spring seasons, not in summer or winter. 

MISO states there was a deficit of 872 MW in the fall in Missouri, attributing this capacity deficiency to coal retirements and planned maintenance. The rest of the MISO zones cleared at $15 per MW-day in the fall. In the summer season, all MISO zones, including Missouri, cleared at $30 per MW-day in this auction. In last year’s auction, all MISO zones cleared at $10 per MW-day in the summer. Last year’s auction results showed reduced capacity prices for the most part, except for Zone 9 – Louisiana, which cleared at $60 per MW-day in the fall of 2023.  

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In this auction, renewable resources, primarily wind and solar, increased. Solar increased by 61%, and wind increased by 4%. Both wind and solar combined, cleared capacity is nearly 10,000 MW. Half of that cleared capacity is solar, which continues to have 50% capacity credit in the summer, fall, and spring seasons and 5% credit in the winter. Demand response was also cleared at 8,000 MW in summer but 6,800 MW in the remaining 3 seasons. Natural gas capacity is the clear winner in the fuel category, with 57,800 MW cleared in the 2024 summer. 

Coal plant retirement delays continue

Suppose states like Minnesota and Michigan – which have enacted 100% clean energy goals since the last auction, need proof that MISO’s capacity market is signaling a delay of coal retirements instead of accelerating those retirements. In that case, MISO explicitly states in this auction that 3,400 MW of coal had delayed retirement. The interesting trend that MISO notes is that the utilities responded to the June 2023 Organization of MISO States (OMS) survey – which conducts a capacity outlook for the upcoming 5 years, affirming that this coal will be retired. 

So last year utilities thought they would retire the coal but this year, when it was time to offer the capacity – they offered coal. 

As a result, more than 1,500 MW of capacity was offered in the auction compared to the OMS MISO Survey conducted last June. 

So, the OMS MISO Survey is a “feel good” survey for state regulators, but the real capacity needs will be visible only when the auction results are announced. The OMS MISO Survey shows that the Missouri zone is deficient in fall 2024 but not in spring 2025. In those seasons, Missouri cleared at $720 per MW-day in this auction. It would be interesting to see what the new survey in June 2024 shows for capacity in the Missouri zone and whether state regulators ask MISO to look into a three-year capacity auction like PJM. However, since most MISO states are vertically integrated, I think a bit of introspection is due – if demand response is appropriately modeled in the Integrated Resource Plans. Is demand flexibility available to meet the seasonal obligations in the IRP models? MISO state regulators should be asking that question. Otherwise, only natural gas will be built in the capacity expansion models.   

Load Modifying Resource upcoming changes

The biggest change to MISO’s fleet of capacity resources is upcoming. MISO has recently proposed drastic changes to Load Modifying Resources (LMRs)—specifically, the notification time of 30 mins. If LMRs can be called upon with less than 30 minutes’ notice and can be called upon multiple times in a season without any restriction, MISO will provide them 100% credit according to a proposal. This proposal is still early, and changes won’t be effective until the 2028/29 planning year. But similar to the wind and solar capacity credit changes that are at FERC right now, MISO is shocking both utilities and demand response providers with these proposed changes. MISO says these LMR changes are needed to ensure there is enough capacity available during capacity emergencies triggered by Energy Emergency Alerts (EEA-2). 

Keeping the current auction results for the Missouri zone in mind, it is surprising to me that even though the Missouri Public Service Commission lifted the ban on third-party aggregators for C&I customers last December (it is a partial ban because residential customers are banned from participating in MISO markets but 100 kW size restriction), this zone cleared at a high price in the fall and spring seasons. In a way, the capacity prices for summer make sense, showing that Missouri made the right decision in a timely manner, even if it was a partial ban, right before the LMR registration process starts at MISO for the auction. 

Michigan, which lifted the ban on aggregators of retail customers (ARCs) in December 2022 (partial ban also, except for 1 MW size restriction), has cleared at lower prices. It is not clear to me how much of the 8,000 MW of demand response cleared in this auction is from states that have lifted the ban (either partially or fully) on ARCs.  

Next steps

MISO’s capacity auction results in 2024 showed exactly where the seasonal capacity needs are according to MISO. MISO has a lot of capacity surplus to begin with, but MISO states that this capacity surplus is eroded with coal retirements. So, it remains to be seen if MISO is going to leave it up to states, as it should, or start beating the drum that too much capacity is retiring with not much to show for renewables. I think the answer is sitting at FERC, which has to decide on MISO’s latest proposal penalizing renewable resources capacity credit. If FERC accepts MISO’s proposal, solar capacity credit will be zero in 5 years.  

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